strategy

DCA: Oil 2020 to Present

DCA: Oil 2020 to Present 150 150 JP

The hardest thing to do is follow your own advice and strategies in the face of extreme fear and uncertainty. At the end of 2019, I had a small position in Occidental Petroleum ($OXY) with a price point under $40. The stock had already been cut in half before I started to buy.

Fast forward a few months and the Covid crash was in. OXY had dropped form $40 down to $10 a share and bounced up to $20 and back below $10 by the end of Halloween 2020. This would have been the time to dollar cost average.

Here’s what an intelligent swing trader would have done. Starting with 100 shares at $40, buy 400 shares at $10, either in March 2020 or November or both. Now you have 500 shares with a total investment of $8,000. Today, that’s worth $13,000. Now, a tidy 62% profit over two years isn’t crypto style winning, but if you can do that every 2 years for the next 20, you’ll be in good shape.

Note to self… follow your own system better.

Risk and Benchmarking

Risk and Benchmarking 150 150 JP

Even the best investors on the planet lose money on certain assets, regardless of how intelligent or risk averse. Don’t make the mistake of trying to be perfect. The best way to limit risk in the stock market is to invest in businesses that are going to withstand the test of time. These are typically profitable and growing and bought at the lowest price multiple possible. Then diversify into as many of these stocks as you can find, and plan on holding them for the long-term.

If you’re not outperforming the S&P 500 Index over a 5 or 10 year period, you should place the majority of your assets into an Index Fund, and speculating on trades with far less capital. Again, there’s nothing wrong with trying to find the next Facebook or Priceline before they turn profitable, but while you do it, make sure you’re building wealth with the market too.